11/13/2014 04:09 pm ET Updated Jan 13, 2015

Whistleblower Statutory Protections Are Frequently Narrowly Interpreted By Courts

Whistleblower statutes typically contain anti-retaliation provisions that limit an employer's ability to fire under the employment-at-will doctrine. Employment-at-will allows an employee to be fired for any reason unless the firing is clearly restricted by contract, statute, or public policy. However, courts are frequently narrowly interpreting the statutory protections granted whistleblowers as this brief review illustrates. Potential whistleblowers and employers should engage experienced legal counsel to understand their rights and duties under applicable legislation.

October 31, 2014, the federal Court of Appeals for the Sixth Circuit upheld a trial court's dismissal of an assertion of unlawful retaliation under the Tennessee Public Protection Act (TPPA) (Hugo v. Millennium Laboratories, Inc.). This statute provides that an employee may not be discharged or terminated solely for refusing to participate in or remain silent about illegal activities. Without reviewing the facts of the case in detail, it is noteworthy that the Court indicated that a plaintiff must provide more detailed evidence than "personal beliefs, conjecture and speculation." The employee must have been discharged "solely for ... [his] refusal to participate in or remain silent about the illegal activity."

The Sixth Circuit wrote that a common law claim for retaliatory discharge requires that a substantial factor in the discharge was the employee's exercise of protected rights or compliance with a clear public policy. Evidence must establish a causal connection between the employee's termination and protected activity. Additionally, the Court noted in a footnote, the Tennessee Supreme Court has stressed that this "exception to the employment-at-will doctrine" "must be narrowly applied and not be permitted to consume the general rule ... that employers need freedom to make their own business judgments without interference from the courts."

It appears that without a "smoking gun" admission of unlawful retaliation, it will be quite difficult for an employee to have TPPA protection. As the Sixth Circuit noted: "[t]he subjective interpretation by the employee of the action of the employer will not create an issue of fact ...."

The U.S. District Court for the District of Columbia on September 23, 2014, dismissed without prejudice (could be refiled later) a series of whistleblower complaints brought by six former and current employees of the Food and Drug Administration (FDA) under the federal Whistleblower Protection Act (Hardy v. Hamburg). Claims were under Civil Service Reform Act administrative review and thus not ripe to be heard by the Court.

The Wisconsin Supreme Court on July 22, 2014, decided that Wisconsin's health care employee whistleblower protection law only applied to employees and not to interns (Masri v. State of Wisconsin Labor and Industry Review Commission). The statute in question did not define the term "employee" and also contained references to "any person." After a lengthy discussion of the statute, the Court applied a dictionary definition of employee. The Court rejected a public policy argument that to protect patients, interns should have anti-retaliation protection. Additionally, the Court accepted the arguments that internship opportunities might be reduced if interns were included under the statute, and any changes to the statute should be made by the legislature.

In 2012 the New York Court of Appeals in a 5:2 decision declined to provide whistleblower anti-retaliation protection to internal company reporting of wrongdoing (Sullivan v. Harnisch). The majority opinion strictly applied the employment-at-will doctrine. The fired plaintiff had several employment titles including Chief Compliance Officer. The majority opinion rejected arguments based upon federal securities laws, and the company's code of ethics and employment handbook (that also indicated that it did not constitute a contract). The dissenting opinion stated in part: "The message that will be taken from the majority's decision is self-evident: if compliance officers (and others similarly situated) wish to keep their jobs, they should keep their heads down and ignore good-faith suspicions or evidence they may have that their employers have engaged in illegal and unethical behavior, even where such violations could cause or have caused staggering losses to their employers' clients."

In an August 8, 2014, decision, the federal Court of Appeals for the Second Circuit affirmed the dismissal of an internal company's whistleblower's complaint concerning his termination. This followed his reporting that fire safety designs had been marked as approved when they were in fact unapproved (Nielson v. Aecom Technology Corp.). The Court concluded that the whistleblower's conduct did not sufficiently relate to mail fraud, shareholder fraud, or securities fraud to be protected under the federal Sarbanes-Oxley Act. The Court wrote: "Nielson does not plausibly allege, on the basis of assertions beyond the trivial and conclusory, that it was objectively reasonable for him to believe that there was such a violation here."

Another internal whistleblower, employed as a compliance officer in Taiwan, discovered improper payments to officials in North Korea and China. He was fired after following internal company reporting procedures (Meng-Lin v. Siemens, AG). The Second Circuit on August 14, 2014, upheld a dismissal of a complaint under the federal Dodd-Frank Act. While the parent company is listed on the NY Stock Exchange, the statute in question does not state that it applies to whistleblower conduct occurring outside the U.S. The statute does allow the Securities and Exchange Commission (SEC) to address conduct occurring outside of the U.S.. However, according to the Court, this limited provision indicates that Congress did not intend the entire statute to have extraterritorial application.

As these cases illustrate, the right to fire under employment-at-will is being broadly interpreted by a number of courts while whistleblower anti-retaliation legislation is being narrowly interpreted by the same courts. Under these circumstances, a potential whistleblower may be best protected by provisions in her or his employment contract that specifically and carefully address whistleblowing. Some government contract employees have such contractual protections when reporting fraud, waste, and abuse. A whistleblower must have very clear and specific evidence of retaliatory conduct as well as clearly meet the statutory procedures and coverage. In contrast, an employer should consistently assert its employment-at-will rights and be thoughtfully consistent in providing a non-retaliatory reason for an employee's termination.